( Reuters) — Adobe Systems, the maker of image-editing software Photoshop, is in negotiations to buy Marketo, a privately held cloud-based marketing software company, according to people familiar with the matter. The deal would boost Adobes cloud-based software offerings as it takes on larger peers Microsoft and Oracle. Marketo offers business-to-business marketing applications that would complement Adobes marketing business. Private equity firm Vista Equity Partners Management took Marketo private two years ago for $1.8 billion. Adobe is expected to pay significantly more than that should a deal be reached, the sources said, though the exact amount being considered could not be established. There is, however, no certainty the talks between Adobe and Vista Equity will lead to a deal, the sources cautioned, asking not to be identified because the matter is confidential. Adobe and Vista Equity declined to comment, while Marketo did not immediately respond to a request for comment. Adobe, which has a market capitalization of $130 billion, has topped analysts profit and revenue estimates for the past eight quarters, driven by strength in its digital media business, which houses its flagship product Creative Cloud. The San Jose, California-based company has been actively exploring possible acquisitions. In May, it agreed to buy e-commerce services provider Magento Commerce from private equity firm Permira for $1.68 billion, in a move to bolster its Experience Cloud business. Marketo was started in 2006 as an email marketing service and is based in San Mateo, California. Last year, it generated revenue of approximately $321 million, according to credit ratings agency Moodys Investors Service Inc. ( Reporting by Liana B. Baker in New York; Editing by Himani Sarkar and Emelia Sithole-Matarise)
Adobe could be shopping for another piece of the digital marketing puzzle, as reports surfaced today that the company might be in talks with Vista Equity Partners to buy Marketo, a company the private equity firm purchased in May 2016 for $1.8 billion in cash. Reuters was first to report the rumor. While the report states the talks are early, and nothing is imminent, and none of the companies involved would comment (understandably), it is a deal that makes sense for Adobe. The company has been trying to build out its digital marketing business for some time, including buying Magento in May for $1.8 billion to help beef up the ecommerce piece. Assuming that Vista wants to flip Marketo for a profit, a good bet, it would likely need to come in at $2 billion at a minimum and probably more. There are only a few companies out there that could afford the price tag, who would be interested in a property like Marketo: Adobe, Salesforce, Microsoft, SAP and Oracle. If Adobe really wanted to go for the digital marketing jugular, it could fork over the cash and buy Marketo. Brent Leary, who covers this industry as the principle at CRM Essentials, says this would be a way for Adobe to grab a chunk of enterprise marketing automation business at a time when the market is getting highly competitive. Marketo would give Adobe a leader in the marketing automation space at the enterprise customer level, particularly in the B2B space. Leary explained. While nothing is clear yet, Adobe has the resources if it wants to do it. The company currently has $6.3 billion in cash on hand, according to data on Yahoo finance, and has seen its stock price rise significantly in the last year from $156.24 to $269.58 (as of publication today). Adobe Creative Cloud has always been the primary money maker for Adobe over the years, generating $1.3 billion in the last report (pdf) in June out of $2.2 billion in total revenue. Digital Experience, which includes marketing products, generated $586 million, and although its trending up, it has so much more potential. We have been seeing more M&A action in this space as companies try to fill in various parts of the sale-service-marketing triumvirate. Just last week, we saw Zendesk, the company that concentrates on cloud customer service, enter the sales automation and CRM part of the space with the purchase of Base. Earlier this month, Thoma Bravo bought Apttus, a company which covers the quote-to-cash part of the sales cycle. Adobe finds itself competing with other giant organizations with the previously mentioned companies all lining up for a piece of the digital marketing business. Getting Marketo certainly has the potential to help push that Digital Experience revenue line up further as the fight for marketshare gets ever more intense. Whether that happens remains to be seen, but Marketo is certainly a company that would match up well with Adobe if it wanted to make such a move. Its worth mentioning that Adobe will be reporting its latest earnings this afternoon.